The group captive solar model is a specific legal structure under India’s Electricity Act 2003 that lets businesses (and their investors) consume solar power at well below grid rates by becoming part-owners of the generating plant. It’s the structure that consistently produces the best landed-cost economics for solar in India.
The key rules:
- The consumer (or group of consumers) must own at least 26% equity in the generating SPV.
- At least 51% of the power generated must be consumed by that group.
- Captive consumers are exempt from cross-subsidy surcharge (CSS) and additional surcharges.
That exemption is the whole game. CSS and ASC together typically add ₹1–4/unit to the landed cost of open-access solar — large enough that captive consumers pay 30–40% less per unit than they would under a standard PPA.
How the structure works
A Special Purpose Vehicle (SPV) is formed to own the solar plant. Equity in the SPV is held by a combination of:
- The captive consumers (industries, IT campuses, manufacturing plants) — collectively 26% or more
- The EPC developer or financial investors — the remaining 74% or less
The captive consumers commit to consuming at least 51% of the generated electricity. The remainder can be sold into the open market.
Cash flows:
- Each captive owner pays a tariff equal to “cost of generation + a small return on equity”
- Because CSS and ASC are exempt, the landed cost lands well below DISCOM commercial rates (typically ₹4–5/unit vs ₹8–10/unit)
- Excess generation revenue from non-captive sales flows back to the SPV
What it costs investors
For a 1 MW plant, the 26% equity slice is roughly ₹1–1.5 crore, often split across multiple group companies. So with a few crores, an investor could:
- Take a 26% stake in a 2–3 MW plant, providing power to multiple consumer entities
- Or take a smaller stake (with another group) in a larger 5–10 MW plant
The EPC partner provides the remaining equity, structures the SPV, handles land procurement, BESCOM approvals, construction, and ongoing O&M.
Steps from zero to commissioned plant
- Identify or form the captive consumer group. They must have actual electricity consumption to absorb the 51%+ requirement.
- Engage an EPC partner (Dexler Energy, CleanMax, Fourth Partner Energy, etc.) experienced in group captive structures.
- Form an SPV under the Electricity Act 2003 with the legal framework defined. CA certification annually.
- Site selection and land acquisition (or solar park plot purchase).
- EPC construction, regulatory approvals (CEIG, DISCOM, open access).
- Commissioning and power supply begins.
- Group captive registration with the State Load Despatch Centre (SLDC) and KERC (or equivalent).
The EPC partner does most of the heavy lifting; the investor’s job is mostly capital commitment and due diligence.
What the captive consumer gets
Concrete numbers:
- DISCOM commercial tariff in Karnataka: ₹8.50–10/unit
- Open-access solar landed cost: ₹6–7/unit (after CSS, ASC, wheeling)
- Group captive landed cost: ₹4–5/unit (CSS and ASC exempt)
For a consumer using 1 MW (~14 lakh units/year), the savings vs DISCOM are roughly:
- Standard open access: ₹40–50 lakh/year savings
- Group captive: ₹70–80 lakh/year savings
That’s why every major IT campus in Bangalore (Adobe, Infosys, Wipro, BIA) has either signed a third-party PPA or set up a group captive structure.
What investors get
The economics for the non-consuming (financial) portion of the equity:
- Annual yield: 10–12% pre-tax on the equity investment
- Payback on equity: 7–10 years
- Accelerated depreciation: 40% in year one (significant tax shield if the investor has taxable profits)
- Plant life: 25+ years
Risks specific to group captive
Beyond the standard solar risks (covered here):
- Consumer churn. If captive consumers leave (factory shuts, IT campus moves, etc.), the 51% consumption requirement can be breached, jeopardising the captive status.
- Compliance audit. SLDC and KERC audit the 26%/51% requirements annually. Non-compliance can result in retroactive imposition of CSS and ASC.
- Regulatory shifts. DISCOMs that are losing C&I customers to group captive structures are increasingly petitioning regulators to impose new charges. Karnataka’s BESCOM has filed such a petition.
Mitigation: structure the captive group with diversified consumers (multiple industries, multiple geographies if possible) so the loss of any single one doesn’t break the 51% threshold.
When the model fits
The group captive model is the right choice when:
- The investor has access to (or is part of) a group of businesses that collectively consume 1 MW+ of power
- The investor has capital for a 26% equity slice (₹1.5 cr+ per MW)
- The structure can be maintained for at least 10 years (mid-term commitment)
It does not fit when:
- The investor has no current power consumption and no group affiliation. In that case, a standard PPA-based shared solar park investment is simpler.